38 German companies will showcase their innovative products at Excon 2013.

German investors in India take a positive long-term view of the Indian market and continue to invest in their operations and tap growth opportunities. . Maharashtra, with around 39 per cent share of German investments, remains the most attractive destination for German business in India. Pune too, has of late become very popular for new German investment; Karnataka and Gujarat are other important destinations, says Rajesh Nath, Managing Director, VDMA India. Excerpts from the interview.

How do you assess the platform created by Excon 2013? How many of German companies are there for the show?
Excon 2013, South Asia's largest event for the CE sector, serves as an opportunity to meet and network with all the players in the construction equipment industry and generate new business. With over 900 exhibitors expected to participate, 300 from abroad and over 35,000 business visitors, one can expect both export opportunities and new distributors. At the official German pavilion, 38 German companies will show their innovative and high quality products.

As per reports, import from China has grown drastically at over 10 per cent compared to Germany. What is your take on this?
In the context of India, it is very important that the European Union and India are concluding a very ambitious free-trade agreement. Negotiations have been under way for some years now and clearly, quality comes before speed. India is the second-most important market for German machinery and plant manufacturers in Asia. Out of the total export of German plant and machinery to Asia, India has a share of around 9 per cent.

In 2006, of the almost Ç11 billion worth of machinery and plants imported by India, Germany was the market leader with a share of 21 per cent followed by China with 13 per cent and Japan with around 10 per cent. In 2007, out of approximately Ç12.5 billion of machinery imported by India, Germany had the maximum share with around 19 per cent followed by China (14 per cent) and Japan (11per cent).

The strength of the German industry lies in the machinery manufacturing industry. The most important features of the German manufacturing industry which gives them a cutting edge in technology are intelligent products, high performance, energy efficiency, product design and configuration and adaptive production. In China, the focus is on economical solutions and utilising low labour costs, low establishment costs and large scale production.

Are we going to see more investments by German companies?
Among foreign investors in India, Germany ranks the eighth. Despite the global recession in 2008-09, German investors continued to show great interest in India when they invested an all-time high amount of $629 million, showing an increase of 32 per cent over 2007-08. German investors in India take a positive long-term view of the Indian market and continue to invest in their operations to tap growth opportunities. Maharashtra with around 39 per cent share of German investments remains e the most attractive destination for German investments in India. Pune has lately seen new German investments. Karnataka and Gujarat are other important destinations.

Many German companies are planning more investments in India. In the construction equipment and building machinery sector as well as the mining machinery sector, companies like Liebherr, Schwing Stetter, Putzmeister, Hess, ZF, to name a few, have invested substantially in the last three to five years.

What is the impact of the economic slowdown on the CE sector as a whole?
With regard to construction equipment, currently only the industry division of building construction is growing. In the last couple of weeks, an increase in demand was visible in all areas. However, it has to be feared that the negative growth for earthmoving and road construction machinery during the weak first quarter will probably have been big to make a turnover result near zero for the entire year. The demand on building material machinery was higher in the first quarter of this year, compared to the same period last year. Even if these should wear off slightly in the next couple of months, a moderate growth for the financial year 2013 is still very realistic.

Has the current slowdown impacted import volumes from Germany?
Germany is India's largest trading partner in Europe. The trade between India and Germany during the first quarter of 2013 was down by 11.8 per cent over the same period last year. The volume of trade amounted to nearly Ç4.2 billion during January to March this year. While Indian exports to Germany declined 6.4 per cent to reach a figure of Ç 0.8 billion, Indian imports from the country dropped 15.4 per cent amounting to nearly Ç2.4 billion. India imported machinery, including mining machinery, worth Ç726 million during the first quarter of this year, which accounted for over 30 per cent of total imports from Germany during this period.

The German companies' strategy for surviving this slowdown is to change the business model and focus on services and value addition. This also includes maintaining existing machinery, streamlining operations and saving costs. Also, the German companies present in India are increasing local procurement and limiting imports to essential and critical parts only.

How do you assess the current scenario in the mining sector?
While three years ago, the mining industry, with the exception of the manufacturers of mining machinery, suffered immensely from the effects of the worldwide economic and financial crises, today the situation has improved significantly, except for those countries that are currently most affected by the Euro crisis.

Mining machinery manufacturers based in Germany did suffer the financial and debts crisis much. Since 2007, their annual turnover grew by about 13 per cent on average. In 2011, growth was nearly 27 per cent, and recently, the turnover reached a record figure of Ç 5.8 billion. Mining machinery made in Germany, just like construction equipment and building material machinery, have an excellent reputation worldwide. The manufacturers expect similar sales for 2013 as they already have orders in their books for the coming 12 months and more; there are expectations of a slight growth.

Brief us on India's position in mining efficiency vis-a-vis other countries?
With global demand for minerals consistently outpacing supply, the recent years have seen an unprecedented rise in commodity prices. In response, companies worldwide have explored all possibilities to boost supply, including increased mining activity in new geographies such as Africa. As the relevance of the mining sector grows globally, the Indian mining sector is lagging behind, with just 1.2 per cent contribution to GDP over the last decade (as opposed to the growth from around 4 to 6 per cent in Chile and Australia and from 1 to 3 per cent in China) and very low exploration spend per square kilometer ($9 compared to $124 for Australia and $ 118 for Canada).

India has initiated several progressive policy measures, putting itself in a good starting position to undertake the transformation of the mining sector. Unlocking the potential of the mining sector in India could add around $210 billion to $250 billion (or 6 to 7 per cent) to the GDP.

What is the present supply-demand scenario for crushers and screens for the mining road sectors?
Crushers and screen manufacturers are expecting a higher sales realisation. The demand is projected to grow to the tune of 10-12 per cent during the current and coming fiscals. This great demand will be led by firm requirement of wheeled and stationary product line. However, the thronging of the emerging demand space by existing players and also by multiple new entrants, over the span of the last five years, will be part of the competition factor. This is expected to bring newer solutions and pricing dividends and added service support for customers.

Do you think the setting up of a regulator for the road sector is going to help the CE industry?
The road construction sector has reached a certain level of maturity but it faces challenges not envisaged earlier, including financial stress, enhanced construction risk and contract management issues that are best addressed by an independent authority. At present, the National Highways Authority of India, responsible for development, management and maintenance of national highways, functions as an executing agency as well as regulator. Hence, the government's decision to constitute a regulatory authority for the road sector is quite helpful.